Higher One—the financial institution that’s been the gatekeeper for Portland State’s financial aid disbursements since 2004—recently faced investigation for deceptive financial practices.
Higher One and its cohort WEX Bank have complied with Federal Depositor Insurance Company consent orders to pay combined civil monetary penalties of $3.98 million, plus restitution of approximately $31 million to be dispersed to an estimated 900,000 consumers.
For the past 12 years, PSU students have formally been required to use a Higher One credit card as their school ID card and a Higher One bank account for federal aid and scholarship disbursements. Fall will be the first term since the university’s contract with Higher One ended and reverted back to mailed check or personal account direct deposit options.
Higher One, in collaboration with WEX Bank, provides colleges and universities with financial disbursement services.
Specifically, the disbursements revolve around the balance of student loans after tuition is paid directly to the school. OneAccount holders with debit card-based products offered by Higher One and approved by WEX Bank may expect to receive restitution money. The FDIC concluded that Higher One improperly collected $31 million in fees from students between May 4, 2012 and July 15, 2014.
“Consumers do not need to take action, eligible consumers will receive notification from the companies following approval of the restitution plan,” the FDIC stated in a December 2015 press release.
“PSU first contracted with Higher One in 2004,” wrote Amanda Nguyen, MFA, CPFM, director of Student Financial Services and the Financial Wellness Center at PSU. “The contract with Higher One ends in October of 2016.”
According to the FDIC Consent Order, Order for Restitution, and Order to Pay Civil Money Penalty, stipulated on December 18, 2015, Higher One and WEX Bank “controlled students’ access to and information about financial aid refund disbursement options because students were required by their school to use the Higher One website to select the method of the financial aid refund disbursement, or wait at least two weeks to receive a refund check by default.”
“It’s kind of messed up,” said PSU student Madison Sauder. “It’s your money and they aren’t giving you clear choices on what to do with it.”
The deceptive practices which Higher One and WEX Bank settled in court about include:
–Each of the web pages in the Higher One/OneAccount enrollment process featured the students’ school logos more prominently than either the Higher One logo or any references to WEX Bank.
–There was no information on Higher One’s refund disbursement home page about options for transferring balances to another bank account or paper check options, either of which may have enabled students to access their student financial aid refunds with fewer fees.
–On the web page where the student made a choice about the method of refund disbursement, information about the speed of receiving a refund through the OneAccount was displayed prominently, but information about certain fees, features, and limitations of the OneAccount was missing.
–Information about the availability of fee-free ATM locations was not available on the web page where students made a choice about the method of refund disbursement. While Higher One generally provided at least one fee-free ATM on each campus, some fee-free ATMs were on campus locations that were closed on nights, weekends, and holidays.
–The website did not contain information notifying students that the OneAccount was an Internet-only checking account.
–It was only after students selected a refund delivery mechanism and entered all personal information that a complete fee schedule and the terms and conditions were readily available.
–If a student wanted to choose another refund delivery mechanism before opening the account, he or she had to click back through previous screens to reach the appropriate web page and resubmit all personal information.
–While the fee schedule contained information about ATM fees for using non-Higher One ATMs, students had to click on another link to find information about fee-free ATM locations.
FDIC Assistant Director, Office of Public Affairs, David Barr said, “The FDIC does not discuss individual enforcement actions, we let the orders speak for themselves.”
The FDIC press release stated, “Higher One earned income from all fees paid by students in connection with the accounts.”
Mathematics grad student James Sauls was able to avoid using Higher One when he began at PSU one year ago.
“I didn’t want a credit card and wanted to do direct deposit,” Sauls said. “I actively avoided it but I can’t tell you the steps I took on [Banweb] to do so.”
“I don’t think they made it very clear you could go straight to direct deposit,” said PSU student Megan Davis, who also avoided using Higher One.
Included in the December 18, 2015 stipulated Consent Order, Order for Restitution, and Order to Pay Civil Money Penalty are instructions that Higher One is to send eligible consumers a certified or bank check by United States Postal Service first-class mail to each eligible consumer’s last address as maintained in Higher One’s records.
If a current mailing address cannot be identified using standard address search methodologies, Higher One is to retain the restitution amount for a period of 360 days from the date the restitution check was originally mailed, during which period the amount may be claimed by the eligible consumer upon appropriate proof of identity.
A request to Higher One representatives for information about this matter was not answered. A request to learn the timeline of restitution payments was also not answered.
“The current [PSU] procedure for processing student loan refunds (as of Sept.16, 2016) is through an automated process that sends a direct deposit to a student’s designated bank account or produces a paper check refund for students who have specifically requested that as their refund method and for students who have not indicated a preference. Refunds are processed daily,” Nguyen said.